Advanced Corporate Finance
Study Board of Market and Management Anthropology, Economics, Mathematics-Economics, Environmental and Resource Management
Teaching language: English
EKA: B560001112, B560001102
Censorship: Second examiner: None, Second examiner: External
Grading: Pass/Fail, 7-point grading scale
Offered in: Odense
Offered in: Autumn
Level: Master
Course ID: B560001101
ECTS value: 10
Date of Approval: 16-04-2024
Duration: 1 semester
Course ID
Course Title
Teaching language
ECTS value
Responsible study board
Study Board of Market and Management Anthropology, Economics, Mathematics-Economics, Environmental and Resource Management
Date of Approval
Course Responsible
Offered in
Level
Offered in
Duration
Recommended prerequisites
Bachelor of Science in Economics, Mathematics and Economics or Business Administration (with finance courses corresponding to a BSc in Economics).
This course requires that the student has prior knowledge of financial markets, financial instruments (e.g., options, futures, forwards) and, in particular, basic corporate finance. The latter includes knowledge about, e.g., the valuation of real assets and capital structure issues - e.g., for uncertain cash flow streams the student must be able to use risk neutral valuation to compute their values in a binomial model and apply this to address debt and equity holder conflicts. Standard concepts from finance such as e.g. the principle of no arbitrage, pay-off diagrams, and discounting must also be mastered. All these competences are acquired in the course "Finansiering, investering og virksomhedsstrategi" (course no. 9161001) based on the textbook:
- David Hillier, Mark Grinblatt and Sheridan Titman: Financial Markets and Corporate Strategy, European Edition, Irwin/McGraw-Hill, latest edition.
The student must have an elementary background in mathematics and probability theory. In particular one should be able to compute expectations, conditional probabilities, variances, and covariances of random variables whether their distribution is discrete (e.g., binomial) or continuous (e.g., normal). Finally, it is highly recommended that the student is familiar with simple optimization methods (e.g., first-order conditions and Lagrange optimization). These are all competences acquired in the courses "Matematik" (course no. 9105701) and "Statistik" (course no. 9116001) which are based on the textbooks:
- Knut Sydsaeter and Peter Hammond, Essential Mathematics for Economic Analysis, Pearson Education, latest edition.
- Malcow-Møller, N. og Allan Würtz "Indblik i Statistik", latest edition.
Aim and purpose
Advanced Corporate Finance deals on a graduate level with financial issues regarding the various decisions taken in relation to the corporation, e.g. capital budgeting, credit rationing, corporate risk management, agency costs, and corporate control. Importantly, Advanced Corporate Finance also analyzes incentive and information problems induced by decision making. The main focus of this course is the theoretical analysis of these issues.
The course aims to give students a thorough understanding of central issues in corporate finance and to see how the problems can be analyzed theoretically. For example, the analysis of incentive and information problems builds on principal-agent and signaling models and central models for agency conflicts are presented. Examples could be over- and underinvestment problems, IPOs (initial public offerings), and takeovers.
In order to focus on the central insights, the primary part of the course uses a discrete-time framework. In order to study the problems, elements from game theory and contract theory can be introduced.
The graduate course Advanced Corporate Finance also serves as background for other elective graduate courses in Finance where e.g. investment or capital structure problems are considered or where empirical questions are discussed in more detail.
To summarize, the course provides the students with knowledge of many core corporate finance topics at a graduate level. Using this knowledge, the students obtain skills to theoretically assess problems in corporate finance which in turn equips the students with competences to analyze and reflects upon complex problems.
Due to assignments and group work, the student also obtains competences in collabaration and communication.
Content
- Capital structure, for example with a view on
- agency problems, e.g. related to investments with option features (strategic and real options)
- tax rules and bankruptcy costs
- bankruptcy law, seniority and maturity
- Corporate strategy, liquidity, and risk management
- Asymmetric information problems (moral hazard and adverse selection) with applications in corporate finance. Applications could, for example, be IPOs or takeovers (corporate control).
Learning goals
Description of outcome - Knowledge
Demonstrate knowledge about the course’s focus areas enabling the student to:
- Explain and reflect upon capital structure models in discrete-time
- Describe, identify, and elaborate on principal-agent type models in a corporate finance context
- Describe and identify theories and models on moral hazard problems or adverse selection problems
- Identify agency problems regarding the capital structure including problems of over- and underinvestment
- Explain corporate risk management theories and models
- Can reflect upon underlying assumptions regarding all topics
Description of outcome - Skills
Demonstrate skills, such that the student is able to:
- Analyze and discuss capital structure models in discrete-time
- Discuss and analyze principal-agent type models
- Analyze and relate theories and models on moral hazard problems or adverse selection problems, and apply such models to, e.g., IPOs and corporate control (takeovers)
- Analyze and discuss agency problems regarding the capital structure including problems of over- and underinvestment
- Compare and relate corporate risk management theories and models
- Criticize and compare underlying assumptions regarding all topics
Description of outcome - Competences
Demonstrate competences, such that the student is able to
- Independently apply models and theories related to capital structure issues with a focus on agency problems
- Identify a need for further development of the models and theories related to capital structure issues with a focus on agency problems
- Apply principal-agent type models in new, but related, topics
- Independently apply theories and models on moral hazard problems or adverse selection problems, e.g., IPOs and corporate control (takeovers) and use this to develop models in new, but related, topics
- Independently apply corporate risk management theories and models and use this to develop models in new, but related, topics
- Use the above knowledge and skills to participate in team work so that the student obtains competences in collaboration and communication.
Literature
Examples
- Selected chapters from Hillier, D., Grinblatt, M., and S. Titman:"Financial Markets and Corporate Strategy", McGraw-Hill, newest edition, or similar material.
- Selected chapters from J. Tirole:"The Theory of Corporate Finance", Princeton University Press (newest edition).
- Articles and lecture notes. An example could be: Myers, S. C. (1977). Determinants of corporate borrowing. Journal of Financial Economics, 5, 147-175.
Teaching Method
The lecturing period can be extended due to intervening project or assignment work.
In addition, there is project work during the semester.
Workload
Scheduled classes:
4 hours of lectures (2x2) weekly for 11.5 non-consecutive weeks. Hybrid classes with classes as either physical or online lectures.
Workload:
The students' workload is expected to be distributed as follows:
- Lectures - 46 hours
- Preparation, lectures - 143 hours
- Compulsory assignment - 80 hours
- Oral examination - 1 hour
Total 270 hours.
This corresponds to an average weekly workload of 13 hours during the semester, including the exam.
Examination regulations
Exam
Name
Exam
Timing
Please note! It is not possible to de-register from this course within the first 3 weeks of the semester, as one (or more) exam activities take place during this time period.
Portfolio (part 1)
Exam: During lectures
Reexam: February.
Oral exam (part 2)
Exam: January (examination for external guest students will take place in December.)
Exam: January (examination for external guest students will take place in December.)
Reexam: February
Tests
Six portfolio assignments (part 1)
Name
Six portfolio assignments (part 1)
Form of examination
Portfolio
Censorship
Second examiner: None
Grading
Pass/Fail
Identification
Student Identification Card - Date of birth
Language
English
Duration
Approximately biweekly during the semester.
Length
No limitations.
Examination aids
All exam aids allowed.
Assignment handover
The assignment is handed over in Digital Exam.
Assignment handin
Electronic hand-in via Digital Exam.
ECTS value
1
Additional information
The assignments are solved in groups of ca. 3-4 students. The instructor can in rare cases grant an exemption and allow single/double person groups. If students are unable to form groups, the instructor can form groups.
At least five assignments must be answered satisfactorily in order to pass part 1. An assignment has been answered satisfactorily when at least 60% of its questions have been answered correctly.
Re-examination
Form of examination
Oral examination
Identification
Student Identification Card - Date of birth
Preparation
None.
Duration
10 minutes.
Additional information
Reexam in part 1 is an 10 minutes oral exam without preparation
EKA
B560001112
Oral exam (part 2)
Name
Oral exam (part 2)
Form of examination
Oral examination with preparation
Censorship
Second examiner: External
Grading
7-point grading scale
Identification
Student Identification Card - Date of birth
Language
English
Preparation
20 minutes.
Duration
20 minutes.
Examination aids
All exam aids are allowed at the preparation.
ECTS value
9
Additional information
The examination is based on a randomly drawn topic, but it can also include questions in other topics.
The examination is individual.
Examination for exchange students: The exam will be conducted with internal examiner(s).
EKA
B560001102
Transitional rules
Used examination attempts in the former identical course will be transferred.
Courses that are identical with former courses that are passed according to applied rules cannot be retaken.
Courses offered
| Offer period | Offer type | Profile | Education | Semester |
|---|---|---|---|---|
| Fall 2024 | Optional | Management Accounting / Organization combination - Odense (Study start February 1st) | MSc in Economics and Business Administration | Master of Science (Msc) in Economics and Business Administration | Esbjerg, Slagelse, Odense, Kolding | |
| Fall 2024 | Optional | Management Accounting / Strategy-Management combination - Odense (Study start February 1st) | MSc in Economics and Business Administration | Master of Science (Msc) in Economics and Business Administration | Esbjerg, Slagelse, Odense, Kolding | |
| Fall 2024 | Optional | Strategy and Organization - Odense | MSc in Economics and Business Administration | Master of Science (Msc) in Economics and Business Administration | Esbjerg, Slagelse, Odense, Kolding | |
| Fall 2024 | Optional | Management Accounting / Organization combination - Odense (Study start September 1st) | MSc in Economics and Business Administration | Master of Science (Msc) in Economics and Business Administration | Esbjerg, Slagelse, Odense, Kolding | |
| Fall 2024 | Optional | Management Accounting / Strategy-Management combination - Odense (Study start September 1st) | MSc in Economics and Business Administration | Master of Science (Msc) in Economics and Business Administration | Esbjerg, Slagelse, Odense, Kolding | |
| Fall 2024 | Optional | Kandidatuddannelsen i Matematik - Økonomi, Odense, gældende fra 1. september 2020 | MSc in Mathematics-Economics - 2023 | Master of Science (MSc) in Mathematics-Economics | Odense | |
| Fall 2024 | Optional | Master of Science in Economics, valid from September 1, 2020 (last intake in 2023) | MSc in Economics - 2023 | Master of Science (MSc) in Economics | Odense | |
| Fall 2024 | Optional | Master of Science in Economics - with profile in Finance, valid from September 1, 2020 (last intake in 2023) | MSc in Economics - 2023 | Master of Science (MSc) in Economics | Odense | |
| Fall 2024 | Optional | Master of Science in Economics, valid from September 1, 2024 | MSc in Economics - 2023 | Master of Science (MSc) in Economics | Odense | |
| Fall 2024 | Mandatory | Accounting and Finance - Odense | MSc in Economics and Business Administration | Master of Science (Msc) in Economics and Business Administration | Esbjerg, Slagelse, Odense, Kolding | 1 | Fall 2024 | Exchange students |